More than insurance - Transformation dilemmas

Original published on prtfolio.hu by István Palkó (December 2019)

PI: CHERRISK is one of the most innovative Hungarian insurtech initiatives, and to top it all, it was launched by an insurance company, namely Uniqa, last September. In May you reported a contract volume over 10k; where are you now?

KK: The last couple of months experienced a real breakthrough at CHERRISK, as the contract volumes are approaching 40k, due to the hard work of our colleagues working at CHERRISK and Uniqa. The launch of the CHERRISK related application, CherryGO back in the beginning of July also significantly contributed to this success; here we have already reached 80k+ downloads with 60k+ active, and 15k+ daily users. There have been some weeks when we managed to exceed the download figures of Tinder in the Lifestyle category. Within CHERRISK one can earn points, more precisely cherries, and these can be exchanged for fee discounts or charity donations. This was developed further on with the help of CherryGO that also awards mobile-free driving, walking, cycling, i.e. healthy lifestyle, and the coupons obtained with the help of the cherries can now also be exchanged at our contractual partners.

PI: There have been several lifestyle applications developed by insurance companies; how sophisticated is the relationship established by the actuaries between the insurance premium and risk prevention in the case of CHERRISK?

KK: As there are no agents involved in the case of the CHERRISK products, fees are automatically lower compared to other channels, as here no commission applies. Besides this, one can also calculate with the potential fee reduction related to the cherries. We are planning to implement consolidation; it is expected that CHERRISK and the CherryGO will operate as one ecosystem both in Hungary and at our new markets.

PI: Well, you mean that CHERRISK is entering the international market?

KK: Yes, I can reveal it now that we are about to launch this service soon in an EU country West of Hungary. The name of the country will be unveiled in a couple of weeks. We have a really tough deadline, so the countdown clock is working at the CHERRISK office again, just like last year before our launch of 17 September. But we are not planning to build any kind of headquarters at our new market; they will remain in Hungary; we are planning to establish multilanguage-multilocation type of operations. It can be stated that this will be the first real Hungarian insurtech business entering a foreign market. The world has been experiencing change, and the structure of Uniqa Group is also changing. From January 1 instead of using the usual technical logic based on the distinction between life and nonlife, Uniqa International will take over the client oriented structure introduced by us here in Hungary last October as a test. From now on will have retail, corporate, bank and alternative digital model manager; this latter position will belong to me from 1 January, besides maintaining my role as the CEO of the Hungarian insurance company and CHERRISK.

PI: For decades insurance companies were turning towards the East; what are the pros of a westward expansion?

KK: Uniqa is basically present in countries East of Austria, and now we are trying to make use of the opportunities provided by digitization, namely that in order to enter Western countries maybe the best solution is not the traditional acquisition, but the use of digital models with a low cost level. By the way, Hungary and the region are doing pretty well in terms of digitization in the field of insurance; we are expecting to experience significant digitization in the Western countries in the coming years – this is why we decided on entering a Western market.

PI: Based on all these you have managed to convince the managers of Uniqa International of moving this direction by showing them the figures of CHERRISK. Is the contribution of CHERRISK to the premiums written and profit of Uniqa measurable? Of course, aside from the fact that the development and marketing costs are declared at the Group, not at the Hungarian insurance company.

KK: Yes, absolutely. This year the CHERRISK related products will contribute to the profit of the Hungarian Uniqa Biztosító with tens of millions HUF, as its insurance technology related indicators are clearly better than the portfolios established on the other channels. This year (2019) we are expecting to further increase earnings before taxes exceeding the last year figures at the insurance company.

PI: Digitization develops much slower in the life insurance business unit compared to the area of property or liability insurance. Furthermore, as a consequence of the outgoing old savings stock Uniqa has also experienced a decreasing level of premiums written in the field of life insurance in the past few years. Do you expect any breakthrough either in digitization or premiums written regarding life insurances?

KK: For the time being our primary goal is stabilization in the life segment regarding the premiums written. Our pension insurance portfolio is definitely on the increase, but the future of savings life insurance plans as such needs a major strategic reconsideration; this is something we are going to work on in the following months. We set it as a goal a long time ago that in the long run we would rather put risk life insurance products into the forefront, thus returning to the classic roots of insurance. In my opinion digitization could help a lot in this field, but no CHERRISK based life insurance can be expected in the near future.

PI: With the help of CHERRISK now an insurance company is on top of the Hungarian insurtech market. How much do you think it would become a general phenomenon that well-capitalized insurance companies energise the insurtech world instead of being in a situation where they have to fear external challengers?

KK: I think this phenomenon is Uniqa specific. As far as I know the other insurance companies there is no such competitor of ours where internal, innovative initiatives are supported to this extent, also by providing the necessary resources. The idea and implementation of CHERRISK has been given such freedom and support that for me, having worked in the insurance industry for 20 years, seems unbelievable to be done by any of our competitors. So, I would not think that our initiative would turn to become a trendsetter; it is rather an example rooted in an exceptional state of grace. Challengers of insurance companies will remain to be external ones.

PI: Who will be the major external challengers?

KK: In the retail area we have to face with various companies, let they be innovative ones working in the field of e-commerce, such as Alibaba, car producers regarding car insurance, or bigtech players from the digital world. However, in areas requiring individual risk assessment and communication, i.e. primarily in the ones serving corporate clients, insurance companies might maintain their unquestionable advantage for a long time.